In our Cautionary Tales series we try to alert buyers and sellers to pitfalls we’ve witnessed in business transactions. We’ve discussed not allowing attorneys to run deals, why PPP money shouldn’t be considered “income,” and how a poor attitude can wreck a business just after the sale. But did you know that a selfish attitude can make sure the sale doesn’t even happen in the first place? Today we are going to talk about two examples that we’ve seen in the last 12 months: one that was a near miss, another that blew up.
“That’s Not My Job”
There are many unwritten courtesies that come along with a transaction. For example, it doesn’t need to be written up in a purchase agreement that an incoming owner should be nice to the employees. Or that an outgoing owner should try to make sure that there are no major disruptions before the deal closes. One of those unwritten courtesies is helping an incoming owner with some of the backend stuff.
For example, you may have a payroll company you use and love, and want to give a warm handoff to the representative of that company. Or you may not like it, have been thinking about making a change for a while, but didn’t want to do it in the midst of a business sale. You can pass that information on to the incoming owner. It’s not going to do you any good to hold on to it.
We recently had a situation in which the incoming owner wanted some information on payroll companies, insurance, office supplies, etc. The seller was adamant: “that’s not my job,” he said. “He (the buyer) can figure that out himself.” As one of our brokers tried to advocate for the buyer, the seller accused the broker of “working for the buyer.”
Clearly, to most rational beings, this is not “working for the buyer.” It’s actually known as “common human courtesy.” But business sales are often not rational: they are highly emotional.
So this is an example of how a broker earns his keep and has a calm conversation with the buyer explaining why it’s unreasonable to have such an attitude, reminding him that ultimately the transaction is about everyone winning and being successful. While we can’t claim to have reformed the seller’s attitude towards life in general, we can say he got on board with helping the buyer beyond the explicit terms that were spelled out in an offer to purchase.
“You Need Me”
A situation in which we were less successful was with a business that was going to sell under the new SBA rules, which allow an outgoing owner to retain some stake in the business. In this particular case the seller held a license that the buyer could not easily obtain on his own. The seller knew this and managed to work in a corresponding “you need me” attitude into almost every communication.
At some point, the buyer got spooked. “How do I know he won’t leave after the deal closes?” the buyer asked. When we went back to the seller and let him know his attitude was causing friction, he (unsurprisingly) crossed his arms and reiterated how important he was.
Well, that attitude won him the prize of getting to keep his business instead of selling it. The buyer, understandably concerned at closing one of the largest financial transactions of his life with someone determined to hold something over his head, backed out.
Selfishness can sink sales. As we said, business sales can be very emotional. And if you let that emotion rule, you’ll put yourself in severe danger of not having a sale go through at all.
Need some help staying objective during an emotional business transaction? That’s what we’re here for. Give us a call today.